HomeMy WebLinkAboutItem 6: Public Hearing - Tax on Vehicle Fuel Dealers
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Public Hearing: An Ordinance Concerning Motor Vehicle Fuel Dealer’s Business License
Tax and Repealing Section 3 of Ordinance No. 20337
Meeting Date: January 14, 2008 Agenda Item: 6
Department: Public Works Staff Contact: Kurt Corey
www.eugene-or.gov Contact Telephone Number: 682-5241
ISSUE STATEMENT
Tonight’s public hearing is for the purpose of gathering community input on a proposed ordinance amending
sections of the Eugene City Code dealing with the Business License Tax on Motor Vehicle Fuel Dealers.
The proposed amendments would repeal the sunset provision on the two-cent per gallon fuel tax rate increase
enacted in 2005, with the effect of keeping the tax rate at five cents per gallon after February 29, 2008.
Council action on this ordinance is needed by January 28, 2008, in order to prevent administrative
implementation of the two-cent roll-back in the tax rate collected by the city.
Eugene lacks adequate funding to operate, maintain, and preserve its local street system. For FY08, the
annual deficit for operation and maintenance activities in the Road Fund is now projected to exceed $1.8
million, and the backlog of unfunded capital street repairs has grown to over $170 million. The two-cent per
gallon increase enacted in 2005 generates approximately $1.4 million annually to operate, maintain and
preserve the city’s street system. To ensure continuation of a reliable fuel tax revenue stream to support
ongoing street operations, maintenance, and pavement preservation, the City Manager recommends that
council repeal the sunset provision enacted in 2005, which would otherwise cause the tax rate to revert to the
three-cent level as of February 29, 2008.
BACKGROUND
Previous Council Action and History
The City’s first motor vehicle fuel tax was enacted in January 2003, based on the recommendation from the
Citizen’s Subcommittee on Transportation System Funding. Their recommendation was for a combination
local motor vehicle fuel tax and transportation system maintenance fee for the purpose of generating an
additional $9 million annually to address the City’s critical transportation system funding needs. That first
fuel tax was implemented at three cents per gallon and has generated about $2 million per year since 2003.
A two-cent increase to the motor vehicle fuel tax was approved in January 2005, along with a sunset
provision that would cause the tax to revert to three cents per gallon on February 29, 2008, unless further
action is taken by the council to prevent that roll-back. Council added the sunset provision, to be effective in
the third year of the increase, citing the hope that three years would allow sufficient time to complete a
comprehensive review of available funding options in the effort to develop a more permanent funding
strategy for transportation system needs, including regional and statewide solutions. Those solutions have
not yet come to fruition.
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On January 22, 2007, the City Council directed the formation of a Council Subcommittee on Transportation
Funding, comprised of four councilors, to study transportation funding options and to bring back within three
months a recommendation for a solution meeting certain specific criteria to adequately fund the
transportation system. At that same meeting, the council directed the City Manager to proceed with a public
hearing on proposed amendments to City Code which would increase the Business License Tax on Motor
Vehicle Fuel Dealers by three cents per gallon to the eight-cent level and repeal the sunset provision on the
two-cent fuel tax rate increase enacted in 2005. Those code amendments were approved by the council on
May 29, 2007, and subsequently submitted to but not approved by the voters in November 2007.
The proposal to continue the local motor vehicle fuel tax at the five-cent per gallon level is an integral
component in a package strategy recommended by the council subcommittee to adequately and equitably
fund Eugene’s transportation system for a variety of users. The package of proposed solutions also includes
a bond levy for capital street repairs, a street user fee based on parking spaces, and a street and
bike/pedestrian path lighting fee. To ensure continuation of a reliable fuel tax revenue stream to support
ongoing street operations, maintenance, and preservation while the implementation efforts continue on the
other elements of the funding package, the City Manager recommends that the council repeal the sunset
provision enacted in 2005, which would otherwise cause the tax rate to revert to the three-cent level as of
February 29, 2008. The proposed revisions to the Eugene Code to enact repeal of the sunset provision are set
out in Attachment A, the proposed ordinance.
Funding Needs, Legal Analyses and Implementation Issues
Repealing the sunset provision would effectively continue collection of the local motor vehicle fuel tax (“gas
tax”) at the five-cent per gallon level, thereby preserving nearly $1.4 million in current revenue collections to
be used for the operations, maintenance and preservation of the existing street system.
Capital Pavement Preservation Needs - The current 5-cent gas tax has allowed the city to complete nearly
$16.5 million in street preservation project work since 2003, with additional contracts in progress. This past
year, more than 17.4 lane miles of slurry seal projects and 20.5 lane miles of rehabilitation projects were
completed, including the overlay of portions of 18th Avenue, Chambers Street and Bailey Hill Road.
th
Projects planned for 2008 include portions of East 13 Avenue, Barger Drive, Chambers Street and
Roosevelt Boulevard.
In spite of these accomplishments, the backlog of needed repair work continues to grow in the face of rapidly
rising construction costs and insufficient revenues. In late 2001, the City was facing an estimated $67
million backlog in pavement preservation work. By spring of 2007, the estimated cost of that backlog had
grown to nearly $170 million and, with no new funding, was projected to grow to $282 million within the
next 10 years. With the impending loss of 40% of the current fuel tax proceeds, the growth in the backlog of
street repairs would accelerate even more rapidly.
Legal Uses of Revenue - The restrictions on the use of local fuel tax revenues for street system operations,
maintenance and preservation is provided in Eugene City Code 3.489 (2): “The net revenue shall be used
only for the reconstruction, repair, maintenance, operation and preservation of City-owned roads and streets
within the city, roads and streets for which the City is contractually or legally obligated to operate and
maintain, or roads and streets for which the City has accepted responsibility under intergovernmental
agreement. No revenue shall be used for capacity-enhancing street improvements.” Use of local motor
vehicle fuel taxes is also limited by the Oregon Constitution (Article IX, Section 3a), which states that
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“revenue from taxes on motor vehicle use and fuel … shall be used exclusively for the construction,
reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and
roadside rest areas in this state.”
Road Operations and Maintenance Needs - The city’s Road Fund accounts for the operation and maintenance
of Eugene’s street system. Due to flat growth in state revenues and loss of historical county road partnership
revenues, the Road Fund is currently expected to have an annual operating deficit of over $1.8 million for
FY08 (growing to $2.1 million by FY09) for ongoing activities such as street lighting, pothole patching,
street tree maintenance, signing and striping of city streets.
Implementation Timeframe – The City’s tax administrator, the ODOT Fuels Tax Group in Salem, suggests
that notice provided them as of the end of January for the repeal of the sunset provision would be optimal for
their administration of this change in code and also provide adequate time for notice to Eugene fuel dealers.
For that reason, action is requested on this proposed ordinance by January 28, 2008.
RELATED CITY POLICIES
The council’s Vision and Goals Statement with respect to Fair, Stable and Adequate Financial Resources
reaffirms commitment to “a local government whose ongoing financial resources are based on a fair and
equitable system of taxation and other revenue sources and are adequate to maintain and deliver municipal
services.” In January 2007, the council identified a new council goal to “Develop mechanisms to adequately
fund our transportation system for cars, trucks, bikes, and pedestrians including maintenance and
preservation and capital reconstruction.” Additionally, the City’s Financial Management Goals and Policy,
A.4, states that the City’s municipal service priority Level 2 (second only to the preservation of the public
safety system) is to “maintain and replace the City’s fixed assets, which includes… infrastructure…so as to
optimize their life.”
COUNCIL OPTIONS
No action is required of council at this time, as this is a public hearing.
However, on January 28, the City Council will have the following options before them with regard to this
proposed ordinance:
Option 1: Council could decline to take action on the ordinance, choosing to make no changes to the
Eugene Code and effectively allowing the motor vehicle fuel tax rate to revert to three cents per gallon;
Option 2: Council could approve the proposed amendments to the Eugene Code to repeal the sunset
provision enacted in 2005, effectively leaving the fuel tax rate at five cents per gallon for an indefinite
period; or
Option 3: Council could extend the sunset to some date certain (e.g., February 28, 2011), leaving the fuel
tax at five cents per gallon for a specified additional period, in order to allow for sufficient time to
implement other elements of the package funding strategy.
CITY MANAGER’S RECOMMENDATION
No recommendation is offered, as this is a public hearing.
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SUGGESTED MOTION
None needed.
ATTACHMENTS
A. Proposed amendments to the Eugene City Code (Concerning a Business License Tax on Motor Vehicle
Fuel Dealers)
FOR MORE INFORMATION
Staff Contact: Kurt Corey
Telephone: 682-5241
Staff E-Mail: kurt.a.corey@ci.eugene.or.us
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ATTACHMENT A
ORDINANCE NO. __________
AN ORDINANCE CONCERNING MOTOR VEHICLE FUEL DEALER’S
BUSINESS LICENSE TAX AND REPEALING SECTION 3 OF
ORDINANCE NO. 20337.
The City Council of the City of Eugene finds that:
A.
In January 2005, the City Council enacted Ordinance No. 20337 approving a two-
cent increase to the motor vehicle fuel tax from three to five cents per gallon. Section 3 of
Ordinance No. 20337 contained a sunset provision with respect to the two-cent increase. The
sunset provision will cause the tax to revert to three cents per gallon on February 29, 2008.
B.
In adding the sunset provision, the City Council anticipated that the three years
would allow sufficient time to complete a comprehensive review of available funding options
and to develop a stable funding strategy to meet the City’s transportation system needs.
C.
Although substantial street preservation work has been completed utilizing the
five-cent per gallon motor vehicle fuel tax, the backlog of needed repair work continues to grow
and construction costs continue to rise. By early 2007 the estimated cost of that backlog had
grown to nearly $170 million, and without new funding, is projected to grow to more than $280
million within the next 10 years.
D.
The Council subcommittee studying the City’s transportation funding needs and
options recommended that the current five cent per gallon motor vehicle fuel tax be increased by
three cents per gallon to eight cents per gallon.
E.
On May 29, 2007, the City Council approved Ordinance No. 20384, which
increased the motor vehicle fuel dealer’s license tax by three cents per gallon and repealed the
sunset provision contained in Section 3 of Ordinance No. 20337. This ordinance was subject to a
referendum petition, and the Council subsequently repealed Ordinance No. 20384. In lieu of that
ordinance, the Council submitted to the electors of the City a measure to increase the motor
vehicle fuel dealer’s business license tax by three cents per gallon.
F.
At the election held on November 6, 2007, the electors of the City rejected the
measure to increase the motor vehicle fuel dealer’s business license tax by three cents per gallon.
G.
The City Council finds it would be in the public interest to repeal the sunset
provision in Section 3 of Ordinance No. 20337, so that the motor vehicle fuel dealer’s business
license tax as set forth in Section 3.467(b) of the Eugene Code, 1971 remains at five cents per
gallon.
Ordinance - 1 VERSION A
S0801146-attA.DOC
NOW, THEREFORE, based on the above findings,
THE CITY OF EUGENE DOES ORDAIN AS FOLLOWS:
Section 1.
Section 3 of Ordinance No. 20337 (the sunset provision) adopted by the City
Council on January 24, 2005, is hereby repealed.
Section 2.
A copy of this Ordinance shall be appended to Ordinance No. 20337.
Passed by the City Council this Approved by the Mayor this
____ day of ____________, 2008 ____ day of ______________, 2008
___________________________ _____________________________
City Recorder Mayor
Ordinance - 2 VERSION A
S0801146-attA.DOC